BUSINESS DECISION: COMPETING BANKS You are the accounting manager for Kool Ragz, Inc., a manufacturer of men's and women's clothing. The company needs to borrow $1,720,000 for 80 days in order to purchase a large quantity of material at "closeout" prices. The interest rate for such loans at your bank, Rimrock Bank, is 9% using ordinary interest. a. What is the amount of interest on this loan? Round your answer to the nearest cent. b. After making a few "shopping" calls, you find that Southside National Bank will lend at 9% using exact interest. What is the amount of interest on this offer? Round your answer to the nearest cent. $ c. So that you can keep your business, Rimrock Bank has offered a loan at 8.3% using ordinary interest. What is the amount of interest on this offer? Round your answer to the nearest cent. $ d. (Challenge) If Southside National wants to beat Rimrock's last offer (part c) by charging $1,100 less interest, what rate, rounded to the nearest hundredths of a percent, must it quote using exact interest? Do not enter the percent symbol in your answer. Do not round intermediate calculations. %

BUSINESS DECISION: COMPETING BANKS You are the accounting manager for Kool Ragz, Inc., a manufacturer of men's and women's clothing. The company needs to borrow $1,720,000 for 80 days in order to purchase a large quantity of material at "closeout" prices. The interest rate for such loans at your bank, Rimrock Bank, is 9% using ordinary interest. a. What is the amount of interest on this loan? Round your answer to the nearest cent. b. After making a few "shopping" calls, you find that Southside National Bank will lend at 9% using exact interest. What is the amount of interest on this offer? Round your answer to the nearest cent. $ c. So that you can keep your business, Rimrock Bank has offered a loan at 8.3% using ordinary interest. What is the amount of interest on this offer? Round your answer to the nearest cent. $ d. (Challenge) If Southside National wants to beat Rimrock's last offer (part c) by charging $1,100 less interest, what rate, rounded to the nearest hundredths of a percent, must it quote using exact interest? Do not enter the percent symbol in your answer. Do not round intermediate calculations. %

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money

Section: Chapter Questions

Problem 9.5DC

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You are the accounting manager for Kool Ragz, Inc., a manufacturer of men's and women's clothing. The company needs to borrow $1,500,000 for 90 days in order to purchase a large quantity of material at "closeout" prices. The interest rate for such loans at your bank, Rimrock Bank, is 15% using ordinary interest. (a) What is the amount (in $) of interest on this loan? (b) After making a few "shopping" calls, you find that Southside National Bank will lend at 15% using exact interest. What is the amount (in $) of interest on this offer? (Round your answer to two decimal places.) (c) So that it can keep your business, Rimrock Bank has offered a loan at 14.5% using ordinary interest. What is the amount (in $) of interest on this offer? (d) (Challenge) If Southside National wants to compete with Rimrock's last offer (part c) by charging $1,375 less interest, what rate (as a %), rounded to the nearest hundredths of a percent, must it quote using exact interest?
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Use the ordinary interest method, 360 days, to solve the following word problem. Round to the nearest cent when necessary. Richie Powers is the owner of American Eagle Boats, a manufacturer of custom pleasure boats. Because of the economic recession and slow boat sales recently, American Eagle has begun accepting promissory notes from its dealers to help finance large orders. This morning American Eagle accepted a 90 day, 8.6% promissory note for $800,000 from one of its sales dealers. You are a manager for a bank, and Richie is one of your clients. Your bank's discount rate is currently 13%. Richie's goal is to discount the note as soon as possible, but not until the proceeds are at least equal to the face value of the note, $800,000. (a) As his banker, Richie has asked you to "run the numbers" at ten day intervals starting with day 20 and advise him as to when he can discount the note and still receive his $800,000. Find the bank discount (in $) for days 20, 30, and 40, and…